Good morning, ladies and gentlemen. My name is Stefan Randstrand. I am the CEO of TOMRA. Together with me today here is Espen Gundersen and Elizabeth Sandnes and we together want to present to you the Q1 results of TOMRA in 2018. It's nice to see that the TOMRA is in a good marketplace.
We are seeing growth aspects in many dimensions. We see improved or increased focus on environmental matters. We see need in the industry to increase productivity, to increase quality and to enable higher consistency. And these are actions and these are needs which we can meet with our sensor based solutions. The Q1 as a result of this environment is interesting.
We have some growth. The group is growing with about 10% after adjustment for currencies and for acquisitions, so organic 10% growth. We experienced a very strong order intake in sorting solutions with a very strong order backlog increase and we made a smaller acquisition, a company called BBC in New Zealand. And we'll talk a little bit more about that later. But first, I will let you listen to Espen to hear all the numbers.
Just a quick look at currencies first. Rather significant swings this quarter compared to same quarter last year. The euro has become stronger, a little more than 7% stronger versus Norwegian krona and the U. S. Dollar has weakened with 7%, 7.5%.
So the euro, U. S. Dollar swing is actually close to 15% now. So in collection, we get a positive effect from the strong euro somewhat offset by the weaker U. S.
Dollar but the totality measured in Norwegian is slightly positive to us. In sorting, we have the negative effect of a weak U. S. Dollar. We have significant sales in U.
S. Dollars combined with the strong euro and New Zealand dollar to some extent, which is representing more the cost base. So consequently, we have a negative impact from currencies in sorting even though converted back to Weichtencrom, some positive effect there also. We will look at this when we come into the segments and the currency adjusted figures. Looking at the financial statements, we have 12% growth in the quarter, 10% adjusted for acquisitions and currencies.
Margin is slightly up because of better margins in the term of sorting. Operating expenses is significantly up due to inorganic activities, meaning BBC was acquired 1st March and we have 1 month of BBC in there, which was not there last year. We have Compaq, now consolidated with 3 months. Last year, it was only for 2 months. Then we have ramp up expenses in New South Wales in collection and then we have also the currency effects.
So bottom line, we are at $142,000,000 in EBITDA compared to $158,000,000 last year. Currency adjusted, however, looking at the extreme right hand side, we are at $138,000,000 last year and $142,000,000 on this year, so slightly up adjusted for currencies. Looking at the balance sheet, the last 3 months, at least looking at the balance sheet dates, both the euro and the dollar has weakened towards the Norwegian krone. So the balance sheet has been somewhat slimmer compared to what we had at the end of last year for that reason. But still the balance sheet has increased from NOK 8,400,000 to NOK 8,800,000 and that's mainly about BBC, the acquisition.
You see the increase in intangibles from NOK3,400,000,000 to a little more than NOK3,600,000,000 because of a goodwill of intangibles. We also actually have an increase in tangible assets that's related to New South Wales ramp up more machines even though the figures look to be almost the same in the last 3 months. Remember that the weaker U. S. Dollar has decreased the figures and then it has been increased again due to the acquisitions on the investments done in New South Wales.
Then we have some increase in working capital, some from BBC and some from New South Wales, which activity is increasing month over month. And adjusting for all these effects, the balance sheet is rather stable compared to what we had previously. So despite the ramp up in New South Wales, we still managed to report cash flow for operations of $120,000,000 which is in line with last year and good compared to previous year, which also have somewhat slower cash flow in the beginning of the year. Significant investments in the quarter, dollars 502,000,000 this is stemming mainly from VBC acquisition, $363,000,000 Then we have ramp up in New South Wales, more centers installed and then the replacement CapEx, so to say, adding up, as I said, to 5 or 2. This compared to last year, in which the significant figure was Compaq $412,000,000 acquisition price for Compaq.
Still solid balance sheet, 53% equity. Interest bearing debt on EBITDA is now increased to 0.8% due to the acquisition, but still strong. And last night, we have our Annual General Meeting. The meeting approved a dividend of 2.35 which will be paid out 8 May. So remember, today, the tonnage share will be traded ex dividend.
Moving on to collection
Thank you, Espen. Collection Solutions continue to be a fascinating business for us. Remember, this is where we started our journey in 1972 as a company where we innovated the automation of taking back bottles on cans. Meanwhile, we have some 80,000 reverse vending machines out in some 30 to 40 different marketplaces. And we have an absolute leading role.
The sheer fact that we over this long time have been able to establish this strong market position and maintaining that market leadership and maintaining our market shares, I think in itself is worth noticing. And if we look into the quarter and as such, we experienced growth that is in this case fully driven by our new market, New South Wales. But all existing markets continue to perform stable. We are still experienced good momentum in Germany. We are in the midst or towards the end, I would say, of what we define as this replacement phase where we are now replacing machines which were installed when the system was introduced in 2006.
And we originally planned that to be an event going for about 4 years. And we had a very strong increase in 2015 2016, better than we have expected. And we are consequently experiencing a slower replacement activity level in 2017 2018. And what we can see is that we anticipate that 'eighteen would be somewhat looking like 2017, which again is a good result. It's a high level for Germany compared to historic levels.
So again, that runs well. Nordic, not too much changes there. We had a replacement activity in Sweden, which was finalized about a year back and we are on a stable ground there right now. We are continuing to be pleased with the new market Lithuania, which we went into in 2016. And I'm just pleased to see how well that is functioning when we can open up a new market in such a short period of time and making sure that it not only works in the beginning, but also over time.
It proves the technology and service professionalism that the team is delivering on here. So well done there. And North America faced quite a harsh winter. It been cold. It's been stormy.
That normally affects our volumes. So if we look compare quarter to quarter, we're actually flat, which in itself should be a positive sign. So nothing big to report here. So the big event in the quarter is really about our new market, which is New South Wales and a new potential market, which I will also talk about shortly. New South Wales, we started go live December 1 in 2017.
So it's only some 4 months away. Today, we have introduced the system in order to reduce littering and they're very concerned of course about marine littering and sensitive ecosystems around the Australia coast and globally. So they put up a target to reduce littering by 40% and with that collecting volumes through our automated and manual collection solutions is our answer to that. So 250,000,000 more than 250,000,000 objects, bottles and cans have been collected until today. And we are pleased with that development.
In fact, it is slightly better than we had anticipated when we launched the system. So compared with our internal forecast and where we are today, that's a positive. So for me, that's a proof that the model works. The system we have put in place with the automation, with the manual collection points, with the data system, with the organization. Remember, we have gone from 0 people about a year back until 100 people now operating here, all doing green jobs and saving environment that all is functioning well.
So well done there to that team. And we are still, however, in a ramp up phase. So this will continue for a while more for us. We will continue to invest more sites, install more machines and that will go until probably Q3 this year, then we should be complete. So as a result, we're also carrying a burden of ramp up cost and installation or investment costs on our result and balance sheet for a continued period of time.
But this is all calculated and all as we have expected it to be. News for us is that the environmental minister of U. K. Has gone out publicly and announced that they will now launch a process to look into deploying a deposit system in England. And the main purpose of this similar to what we have seen in Australia is to reduce plastic pollution or littering.
It's quite a sizable market. So, and there's a lot of containers being consumed every day. So it's something we warmly appreciate and salute that they take this initiative in legislation process, etcetera, that's all not announced to us. So for this time, we just want to take notice of that. There has been announcement.
There has been a clear indication that something will happen. And as soon as we know more, we are happy to report back to you. But right now, we avoid any speculations and just confirm that we are keen to look into this and support the government and authorities in the UK for implementing such a system. With that, I will hand over to Espen to listen to some of the financial details in Collection Solutions.
Thanks, Stefan. Yes, top line growth of 5% currency adjusted in adjusted in collection. The markets, as Stefan also touched upon, is flattish, even though in Norwegian krone, it's up in Europe and down in U. S. And we adjust for currencies, the underlying activity is stable and in line with the last quarter in our Q1 in 2017.
The growth is consequently coming from Australia, from New South Wales and it's close to €50,000,000 Norwegian krona revenue recorded from these operations in Q1 2018. Gross margins are stable. The OpEx is up due to currencies and ramp up effects and activities in New South Wales. It's 6% to 7% organic growth in OpEx in the quarter when you adjust for currencies. Bottom line is consequently down because of the loss from New South Wales.
Moving on to sorting solutions.
I would say it doesn't matter which dimension you take, looking at sorting solutions, it's a brilliant quarter. The market is asking for more automation in the areas of food, recycling and in mining. In food, it's much driven by the need to improve quality and consistency and also to automate to make the value chain more efficient. Hence, we have with our portfolio and with our broad portfolio, I would like to say where we are covering some 100 different food applications, all from food for processing, dried food, fresh food like fruit and now also berries. We have a broad coverage and can play in many different geographies at the same time.
We see an ever increase in demand in food products and also new structure changes like digital economy plays a role in how the market develops. Food experienced a sound growth both in order intake and in revenues and our technologies prove again that we have a high degree of innovation. We have a very broad platform, both from a sensing technology point of view and from mechanical platforms. And we can serve most needs and by that also able to go into very complex applications. If we look into recycling, that is maybe the highlight now.
I should maybe have started with that. Just started with food because it's bigger. But recycling is really in a very dynamic phase. I think the biggest driver here is the China regulation, what they call National Sword, where China has gone out public and said, we don't want to be the world's waste dump, which is right. Why should we send waste from different parts of the world just to be handed in China?
Why don't we take care of our own waste? That is the rhetoric here. And this is something I think from a macro perspective, which makes full sense. But as a result of this, a lot of waste was in the past recycled in China, handled in China. And that opportunity has just gone.
And many markets, many countries are facing challenges because they were not prepared with their capacity, with their technology and processing to handle all the waste. Therefore, a lot of emergency actions are taking place right now. And we are with our technologies in a good position to support both our clients and the national systems to improve that. So as a result of this, sorting solutions is in recycling is experienced a moment of very strong market momentum. This will not last forever, but as we see it right now historically and for the near future, we see continuous good momentum here.
So as a result, very strong development in order intake in recycling. Mining for the period was a bit slower. No events actually. However, we see that also here momentum is there, is also picking up. It's just quarter to quarter.
We are quite a small business. It can swing a little bit. But we absolutely no concern. And some of the highlights here, definitely our solutions for the diamond industry are proven, are delivering exceptional results, I would say. Since 2015 I heard that some 80% of all big diamonds being found were detected with our technologies and by that being recovered before they are destroyed in the processes.
Also further developments like requirements for lithium for car batteries are increasing in demand and with that our focus on industrial minerals. So that sector is exciting also going forward and we continue to support it. What makes us unique as a Tomura is our broad technology base. We have over years now invested significantly in building a leading technology base with a broadest platform of sensors, with a broadest technology platform, where we combined our technologies across the different businesses to get economy of scale. Our vast geographical footprint and our willingness to continue invest in innovation and technology pioneering that makes us unique.
And also I think that is a reflection we see here that many significant clients turn to us to look for an answer and hence we see good activity levels. In the quarter, we also made acquisition, the company BBC and BBC Technologies, sorry, I should be complete. A market dynamics and we experienced good momentum for BBC Technologies. It's only been with us for a month. So we got to be careful.
But I'm overwhelmed with what we have seen there, how they have developed this business, how the whole organization and team, the spirit behind it and the drive to serve customers on a global basis despite being fairly small company based in New Zealand. It's been quite remarkable delivery or performance they have put up to the street here. But of course being part of TOMRA now we can support them further with our global footprint. And I think that was pretty much the motivation from there and also to join up with us to bring more people when it comes to sales and service in the different geographies where we are already placed and they want to expand and also look into other opportunities how we can advance technologies given our broad library of technologies and also searching for synergy areas in say operations where we have quite an extended low cost country sourcing network, for instance, where we've been working for many, many years in that area. So if I just sum up, I have said most of it, but good momentum in food, revenue growing and strong order intake and also the acquisition which was completed on March 1.
So 1 month with BBC Technologies on board. Not a long history, but about the prospects and we are proud of the results the team delivers in that regard. With that, I hand over to Esben.
Yes. Then it's time to look at the figures for sorting. We came in at NOK820 1,000,000. It's very much in line with what we indicated at the end of last quarter, remembering that BBC came in on top with $12,000,000 of revenues in the month of March. The margin is up from last quarter and it's actually significantly up when we adjust for currencies.
Currencies. So it's a good margin development. And it's mainly about business streams, product mix and also the fact that Compaq has improved their margins compared to what we had the 2 first months we consolidate them into our accounts last year. Operating expenses is also increasing. Again remember one more month of Compact, one more month of BBC.
Some currency effects, but the underlying organic growth is between 6% 7% also in this business area. So ending the quarter with the NOK41 1,000,000 profit compared to NOK30 1,000,000 or NOK8 1,000,000 adjusted for currencies. So now you see how much currency actually counts for when you look at the 2 right hand columns on currency and non currency adjusted figures in Sorting Solutions. Order situation, it's very positive, very strong order intake in the quarter, all time high with good margin actually. So despite we have rather good growth in revenue, meaning Q1 revenue growth was significant upon Q1 last year.
So a lot order has been taken to P and L. So despite this, we have a very high order backlog at the end of this quarter. So it's a good situation going into 2nd and third quarter and the conversion rate, as I always say, is not guiding, but an estimate for those of you that want to model Tomer on a quarterly basis is assumed to be 70%, 7.0%. Talking about the future. In collection, it's Q1 was stable, Europe was stable, U.
S. Was stable. And the big picture is going into Q2 and also for the year to be stable. Also in Germany, which has been kind of stabilizing on a level which is in line with what we saw in 2017, which is a good level, but somewhat lower than 2015 2016. So overall, the stable business in both Europe and U.
S. For the rest of the year. In New South Wales, of course, activity will increase. And we had close to €50,000,000 of revenues in this quarter, €10,000,000 maybe €20,000,000 more in the next quarter. We still will continue to lose money because of the ramp up effect.
We're also going into the winter, so the volumes is slightly lower as the temperature is falling in Australia. But the loss will be less in Q2 than in Q1. Q3 probably close to breakeven and then in Q4 we will make money. In sorting solutions, it's good momentum in all business streams and we are have a positive outlook. And you can also look at the 70% that's mentioned on the conversion rate for Q2.
Also for Q2, you have to remember currencies 7% down on euro, at least looking at the spot rate today and 3% up on the euro and 7% down on the U. S. Dollars. That completes the presentation and we open up for questions from the web.
We have some questions from the web. The first one is from Nikkor Nijal with Carnegie. When can we expect an answer on the Queensland Deposit Tender?
You take that one, Queensland Tender?
Yes. Queensland is doing a process now when it comes to implementing deposits in the States. It's tender is out. We have been participating in the tender process. And the commencement date was previously 1st July, now postponed to 1st November.
So we need very quickly to get a response on this if the 1st November is a date that will still stand. But it's nothing more true to communicate around that. It's an open tender process as many stakeholders, competitors are delivering tenders on that. And it's open to see whether we will have a role or eventually what kind of role we will have on that. But given the commencement date in 1st November, we assume that it will be rather quick response on that process now.
Thank you. A second question also from Mikael Are you able to say anything about how big the effect from China is to the recycling vertical and how and for how long you expect it to last?
You're talking about the National Sword. How long it will last, very difficult for us to say. I think it's quite a significant amount of improvement processes that need to be taking place and in many places. So actually that's a challenge also to be able to serve so many different markets. And the size also very, very It also depends on what would be the ambition.
What ultimately would the different markets ultimately want to do with the plastic. Do they want to recycle it into a closed loop? Then there is more of downstream investments for them in doing high quality processing. Do they want to make a minimalistic approach and recover it, separate it and down cascade the material? So difficult to say.
Just be cautious that it is not a normal we are in where we are experiencing this very high momentum. That's all we can say for now actually.
Thank you. A last question from Mikael from Carnegie. Was compact improving
that Compaq, good question. Compaq had a good first year for us last year. We label it as a turnaround case and delivered. And I can also confirm that the Q1 was deep into the positive. So well into the positive is a better word maybe, but it was a positive result.
And we are on the right track here. I think for a business like Compaq where you have a quite substantial operations base, critical will be the order intake. So if the order intakes and the volumes continue well, which they have done so far, if the market is with us, so to say, then I have very little concern about the future. So far, everything looks good. And I we will keep on is the market development.
Thank you. A question from Glenn Kringheu with ABG. Can you put a number on the earnings impact from New South Wales in Q1 and also an indication on what it should be in Q2?
Yes. I think I said most of that in the outlook statement. But as I said, top line close to 50,000,000 in this We are, due to the ramp up, still negative. So it's still double digit, but low double digit loss on the bottom line, €10,000,000 to €20,000,000 depending upon how you measure. This will improve going into Q2 as we get more installations, more volume going through our infrastructure, but still ramp up effect, bringing additional costs to running this.
And Q3 breakeven, Q4 positive. That's the way we have kind of budgeted this and it's also the way it looks today to end up.
Thank you. A question from Thomas Drafior, company unknown. Tumra involved when representatives from China, India and France visited Norway early this year in order to look at how a successful deposit bottle deposit system is working.
I must just say the following. There's a lot of delegations coming here, and we are involving many of the delegations. I don't know exactly which delegation this was. If there was a combined China, India and some which were a lot 3rd mark?
The countries mentioned was China. There were China, India and France.
And France. I am not aware that we have been evolving in such a delegation where the combination of these three countries were there. But if you look at individual visits, there's quite a lot. And the Norwegian system actually as such is studied quite a lot because it's a rather well functioning system in our views. Anything you had to add there?
This might be something that Infinitum is more involved in.
Yes.
A second question from Thomas Rafior. Any update on the Queensland bottle deposit operatorship in Australia? I guess you did address it, Aspen, but for the sake of color. So with that, we have no more questions from the web, and we'll leave it to you to conclude the webcast.
Thank you very much for listening in, for supporting us. And again, we are pleased with the quarter. Good organic revenues growth. We made some inorganic moves, good progress in New South Wales. And we are in an exciting marketplace, both for collection solutions where we see more momentum with new markets than ever, whilst the traditional markets are performing well, albeit not growing, which we fully understand, but given how the high penetration, given our high market share, this is already very good.
And it's pleasant to see the new developments and it's very pleasant to see our good progress in New South Wales. I'm proud of that. And of course, with the sorting solutions where we have now invested so much in technology, building our structures, building our marketing and sales footprint to see that that's paying off. That is a great pleasure for us. And we look forward to continuing serving our customers on a global basis.
And see you soon again. Thank you.